How To Avoid Credit Repair Scams

When someone is having problems with their credit because their credit report contains far more negative items than positive ones they are much more likely to spot advertisements that claim to help repair bad credit or establish a fresh credit history.  However, the Federal Trade Commission advises to be very wary of these kind of claims because they are likely warning of a credit repair scam.

There are without doubt more than a few alarms that can help anyone discover if the company behind the ads is conducting a credit repair scam.  Unfortunately, the sad reality is that there isn’t a quick fix to be found for bad credit reports.  The good news is that your credit report can be rightfully improved with time, unwavering persistence, deliberate effort and consistent debt reduction.

The First Alarm Bell - Paying Up Front 

Many credit repair scams will often times aim for those individuals with a bad credit history and promise to cleanse their credit reports enabling them to buy an auto, get approved for home refinance or successfully apply for a job that will require a credit check.  Of course, a hefty fee will be charged for this service.  Firms that require their customers to pay for services before services are delivered is one of the biggest red flags that should alert desperate consumers they probably are buying into a credit repair scam.  The Credit Repair Organizations Act prevents companies in the business from requiring payment for services they have yet to provide.

Alarm Bell #2 - Incomplete Disclosure

Other warnings include companies that will not tell clients their rights about what they can accomplish on their own for free without needing so called professional help.  They represent that credit repair firms are only allowed to contact credit reporting bureaus or even credit card companies. They discourage people from contacting the major national credit reporting bureaus directly.

Alarm Bell #3 - Unrealistic Promises

There are less than reputable companies that will promise prospective clients that they will be able to clear out all or at least most of the negative credit information reported on their credit reports.  While companies may be able to remove some negative information on your credit report, if it is inaccurate, but NOT information that IS accurate. Negative items that can’t be disputed will stay on a credit report for up to seven years and cannot be removed.

Alarm Bell #4 - You Will Get A New Identity

Another misleading sales pitch credit repair companies make is to recommend creating a new credit identity with use of an employer identification number rather than using their Social Security number.  This involves using a newly issued employer identification number to initiate new credit reports.  Whereas this strategy may sound like an almost free rescue, it is in fact not legal and can end up getting someone in more trouble than just having a negative credit report.

Alarm Bell #5 - Excessive Pressure To Sign

Firms that are intent on scamming rather than providing legitimate credit repair services will hurry someone into signing a contract without giving them the chance to thoroughly read it and to understand all contract provisions such as exact services provided for, guarantees, etc. 

The contract should include details about fees charged and exactly what services are being provided, the dates when these services will be completed and the legal name and recorded business address of the company contractually obligated to perform these services.  When signing a contract of any kind in the US the law allows for any contract to be canceled within the first three days after signing it.

Buyers beware!

It is the responsibility of consumers to check out the companies promising to deliver credit repair. Use the better business bureau, state attorney general office and independent authority reviews sites to get as much information as possible before making a commitment. Also, much can be done without the expense of hiring a company to do what can be done without hiring them at all.